Investors are dialing back expectations for a bit shift in US trade policy, boosting multinationals, emerging markets, and the peso

Chinese firms issued $52.6B in US dollar bonds last quarter, up 72% from the prior period!

The Fed agreed at its March meeting that it would likely begin shrinking a $4.5T securities portfolio later this year

Private sector hiring remained strong with employers adding more jobs in March than expected

Company News

A year after its failed bid to merge with Office Depot, Staples is in talks to several private-equity bidders about a possible sale

Boeing agreed to sell up to 60 jets to an Iranian airline, despite uncertainty over the Trump administration’s stance toward Iran deals

The NFL reached a deal with Amazon to stream 10 Thursday night games

An Apple supplier raised the prospect of a patent fight after the iPhone maker said it would stop using its GPUs

GE is weighing a sale of its lighting unit, the latest move in the conglomerate’s pivot away from consumer businesses

Ford said it would start building electric cars in China to tap into a state-sponsored boom in green-energy vehicles

Interesting News

More than 100 Navy instructor pilots have refused to fly over safety concerns. There was an interesting 60 Minutes piece on this a few months ago! The reason is that the oxygen system is potentially lethal. Pilots are required to use supplemental oxygen for every moment they are above 14,000 feet MSL and for every moment after 30 minutes they are above 12,500 feet.

A homeless man was cited by the SF Police department for eating pizza at a downtown bus shelter

Technically, eating is prohibited on public transit, however, his lawyer’s argument will be, “food prohibition doesn’t necessarily extend to bus shelters, just buses.” Silly San Franciscans!

In preparing for their match against North Korea, South Korea’s women’s soccer team is preparing for loud cheers – I guess taunts is a better word – rated at 100 decibels!

Commentary for the Week of April 3 - April 7, 2017

by David Abuaf, CFA

Investment Manager, RJFS

Plenty happened in the markets last week, but you wouldn’t know it from the stocks’ final tally. The action started early in the week with the release of disappointing auto sales that caused everything car related to tumble. The S&P 500 bounced back the next day but fell apart again on Wednesday after the minutes from the March Federal Open Market Committee showed the Fed considering shrinking its balance sheet before year end while down in DC Paul Ryan played down a quick series of tax cuts. Thursday night brought a US missile strike in Syria while Friday saw March payrolls come in well below economists’ forecasts. Even Scott Clemons from Brown Brothers Harriman said “there were more than five days of news this week, I’m impressed by the resilience of this market.”

But Porcelli may be on to something, we may need to tamp down our confidence in an economic acceleration in the near term. The Atlanta Fed’s GDP estimate change by half, from a first quarter growth of 0.6% down from 1.2% a few weeks earlier. But David Rosenberg of Gluskin Sheff noted that last year saw a big snap back in GDP growth from the first quarter to the second.

But maybe the markets don’t need another snap back. The US economy hasn’t grown by more than 3.5% since the third quarter of 2014, yet the S&P 500 has returned 26% during that period. Ed Yardeni of the eponymously named research group put it succinctly, “If there’s no boom, there’s no bust.” How…enlightening?

If anything changed last week it was the fact that Yellen and company are considering curtailing their bond purchases. And just as the Fed’s bond purchases had the effect of making monetary policy even easier than it was, it could make money tighter as interest rates rise. As the Fed lets balance sheet roll off, then interest rates will be going up faster than you see just by looking at the fed-funds target.

All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.

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